sorkin and steve liesman who is in for joe, who is still on vacation. steve, welcome. >> thanks for having me. >> great to have you here today. we have a lot of things to talk about this morning, including stocks snapping a two-day losing streak yesterday, reversing early losses to end higher. we have been watching the u.s. equity futures this morning and so far not a definitive direction for any of the markets. the dow is up -- below fair value by 10 1/2 points. s&p 500 futures down by just over 2 points. the nasdaq is up by one point. we have some economic tests today that the markets will see. weekly mortgage applications out at 7:00 eastern time. an important read on the health of the housing industry. and then our focus will turn to inflation. we get the july producer price index out at 8:30 eastern time. the headline number is expected to rise by .3%. the core component is seen rising by .2. some important economic data out of europe earlier this morning. official figures confirm the recession in the eurozone came to an end in the second quarter. the 17 countries that make up the bloc saw their collective

economic outlook grow. the two biggest drivers, strength in germany and france. things are up slightly this morning in european trading. but there has been some interesting calls on this. and we'll talk more about what jim cramer had to say about europe a little bit later in the show too. an update from our colleagues in london in a few minutes. >> jimmy saying europe is back. and that's a big story for u.s. stocks. corporate news, the former jpmorgan trader known as the london whale and regulators reached an agreement to avoid criminal prosecution. but two are expected to be charged as soon as today. the s.e.c. is said to be in settlement talks with jpmorgan over disclosures of the trading losses. number of activist investors in the news today. let's start with carl icahn. he's taking a large position in apple and says the stock could be worth as much as $700 a share. if ceo tim cook pushed for a larger stock buyback. in the tweet yesterday, icahn announced he has spoken to the

apple boss, described the conversation as, quote, nice and said they plan to speak again shortly. in an interview in the wall street journal, icahn said he wants the buyback to happen right away while the shares are cheap. >> if you're tim cook or any ceo, usually you like to hear when new shareholders buy your stock, but when you hear carl icahn is buying your stock and then wants to have a teletone call with you, which apparently he had, how do you feel before that call -- after that. how do you deal with the phone call? >> it sounds like carl is walking into this one a little bit more of a lighter touch than some of the others we have seen in the past. he's walking in and saying i would like to see a stock buyback. from what i hear -- from what i hear, just from what i hear, on background people familiar with the situation say, look, apple is in a similar position. they agree with a lot of what he's talk ing about. so they do have common ground there. so maybe treading lightly. >> one point, you tread lightly --

>> as in breaking bad, until not. you don't know me, tread lightly. >> how much cash is apple sitting on? do you know the number? >> i don't know the number. clearly over $100 billion, yeah. >> i would say if you're tim cook, sitting on that cash, you do not expect a call from a guy like carl icahn, you're not well served by your advisers. >> i agree. but -- >> you should be sitting there waiting for the call, you should be ready to defend your corporate decision to sit on that cash. >> 137. but they have defending this decision for -- >> that's what it was. >> for ieons. it is different when it is carl. more on bill ackman and his departure from the jcpenney board, big story for us yesterday. the wall street journal now reporting the retailer's board told ackman that he breached his board room duties by disclosing information about the company's financial position, and searched for a new ceo. interesting issue because he would have said that he was actually doing his duty because

the board wasn't. but it is interesting. anyway, ackman spoke to charlie rose last night about his resignation. >> i think the markets are better if directors are willing to take a stand and say, look, i'm concerned about steps the company is taking in its business. and that's what i did here. >> you want to be the champion of transparency. >> the champion of shareholder, you know, i'm a representative of the shareholders, i want to be a champion of company and the shareholders. when i'm concerned about the direction of the business, i'm not afraid to air the concerns. i'm a very straightforward person. i say what i think. >> look at shares of jcpenney. sometimes rubs people the wrong way. he's managed to do that over the past couple of weeks with the number of these situations. >> just the idea that, yeah, if you're a director and disagree with the direction the board is taking, you should sit up and make your concerns clear. i guess there is a time for negotiations within a board room, a time for negotiations outside the board room. i wonder what the threshold is

for all of this, saying forget it and taking your complaints private. >> this is the issue that warren buffett raised. >> it is an interesting thing we should ask a lot of guests as they come on. what is the threshold for saying it. he's right in the contention that if the board is taking things in a direction, you completely disagree with, you should voice your concerns. i just don't know when it is disruptive and when it is actually helpful. >> don't you have to think that ackman's decision to go public is strategic and not principle? he's after maximizing his returns. he has to get to a point where -- maybe he can't help himself, maybe he can't keep his mouth shut. >> strategic and principled can. shares are $13. now $12. >> not like he's got a -- >> he's got to get them back to $25, so it is not a two-day

issue. not a five-day issue. >> he stepped down from the bard, he can't sell his stake immediately because he knows insider information. >> my point is he's going public because he thinks it is the best route for achieving his -- >> tactically he must believe that. >> he must believe that. and not the champion of transparency kind of stuff. i think ackman would be quiet when it serves his principles, serves his returns, and he would be -- he's public when it serves his returns the other way. i don't think there is any principled aspect to it. >> i don't know if that's a problem if you're looking at somebody who is a major investor, 18% of the company, and can't get out in the next couple of months. i guess it depends how long-term of a -- >> he got to a place where it doesn't serve him anymore. >> one other piece of this, i think in his case he does always believe he's principled. meaning it is -- to the extent he thinks it is his principle, the rest of the world may not

think it that way, but he does. >> is this different? you've been doing this for a while. i've been doing this for a while. i remember when they used to go public, it was through a very subtle leak to a reporter at the wall street journal. it wasn't this stuff of icahn versus ackman on cnbc. it wasn't this kind of stuff, a guy goes on charlie rose. there is a different kind of activism out there. >> much more public, yes. >> it may be more public, but i think it is -- like, pulling strings quietly from, you know, if you're oz behind the curtain, i don't know if that's any different. it may be a different appeal. in terms of -- if -- i don't think it changes what they were doing before or now, just in terms of having a goal and trying to achieve that goal. man a different way of doing it. i don't think it changes what they're doing one way or the other. everybody has an interest. everybody has something -- >> we have a second piece on bill ackman we should talk about this morning.

this one is the short bet. >> more ackman news. >> doesn't end. yesterday, i first reported that a former herbal life employee has been subpoenaed by the attorney general to produce documents regarding a 2011 safety concern about the company's nutritional shakes. the ex-employee now seeking whistle-blower status with the fcc, the employee first approached about the concerns, the fda in december, he then got in touch with ackman. now, ackman is offering to pay the employee's legal fees, which sort of makes everything -- complicates things when it comes to how everybody is looking at all these thing. i wish that wasn't on the table. the health concerns i think are real. here is what it is. they do have an issue that happened in 2011. at the time, the company had found shards of metal detected in some of herbalife's nutritional shakes at the plant in california, the largest plant that produces their biggest

product. basically what happens is the powder flows through sifting screens, meant to keep contaminant out. instead the screens were breaking and pieces of metal from the actual screens were finding their way into the powder. the problem apparently was resolved within several weeks. at least that's what herbalife says. they have acknowledged the incident in a statement yesterday and said only safe products were shipped to consumers. ackman also talked about herbalife with charlie rose. >> if you look at our history over ten year, i'm not used to getting into disputes with people. we have been a very krublconstre shareholder of a meaningful number of companies over last ten years. most of this comes from a battle with herbalife. in the case of herbalife, i'm not shareholder pushing to make it more valuable. >> you're short on herbalife. >> we're short the stock. we believe herbalife is

operating a scheme. we believe they're transferring wealth from a very large number of low income hispanic individuals in this country and around the globe to a handful of wealthy people. >> moral outrage. >> certainly moral outrage. >> to make one quick point on the food safety issue. we did say that the company says that none of the product with these metal shards got out, and there is no evidence that it didn't. >> no evidence that it -- >> that it did. the real issue is how it was dealt with, traditionally a big food supplier, if metal gets in the food, they typically take that batch and destroy that batch. a number of intern documents including what this whistle-blower apparently is saying is actually that that's not what happened in this case. in fact, they tried to remediate the product by running it through metal detectors and at one point had discussed buying x-ray machines to -- >> instead of just destroying.

>> instead of destroying the product. it is a cookies and cream product. they decided the machine wouldn't work because the tsa kind of style people would have to look through the stuff and would mix the cookies with the metal. so while the product may have never gotten out, it is one of those things where you may never know. >> you wonder about quality controls. >> exactly. the same management today. that's what this issue is all about. which is very different from the ackman argument which is that it is a pyramid scheme. so there is a pyramid scheme issue and then this food safety issue. the food safety issue we think has been taken care of at minimum. >> we do have other investor news to talk about. david tepper's appaloosa increased his stakes in citigroup, bank of america and good year. he's now the largest shareholder in gt. he's taken new stakes in carnival, hertz and chicago bridge and iron. steve? time for the global markets

report. carolin roth is standing by in london. i want to hear what she has to say. does it feel like the recession is over over there? are you partying? are you out in the street? what's going on? >> we're not popping the champagne bottles just yet. but you can definitely feel that europe is turning a corner and you know what, germany has been leading the way higher, second quarter gdp beating expect takings up by 0.7%. friends also doing extraordinary well up by 0.5% in the second quarter. this is in fact, the strongest quarterly growth in two years. overall, the eurozone gdp numbers up by 0.3%, that also a tad better than forecast. looking at the market reaction, though, that's an interesting one because we did see markets being pretty much flat throughout the session. now they have just been turning higher over the last couple of minutes. we hit a session high, just a few minutes ago. some people say, yes, this recovery may have already been baked into the cake.

and that's why we're seeing this reaction. the ftse 100 is flat after some under performance earlier. there are stocks trading today. the xetra dax is up by .1%. the ibex still underperforming by a quarter of 1%. we have the boe minutes out from england, which showed an 8 to 1 split in voting for forward guidance. the all important forward guidance under mark carney. this is a setback for him, because we were expecting this unanimous vote. on the back of that, let's look how sterling dollar is performing. we did see this big jump earlier on in the session. currently changing hands at 1.5464. that's a big jump that has come down a little bit. euro dollar, it is down by around .1%. it is interesting, isn't it, given the eurozone is leading the recession while, again, many people say this has already been priced into the currency here. back over to you. >> carolin, thank you for that. back here at home, we have a little bit of news, political

news, the ballot now set for new jersey's special election for u.s. senate. and he's somebody who come on the show quite often, often enough. newark mayor cory booker won the democratic primary last night, easily defeating three opponents. now going to face republican steve logan who won his party's primary. both men going to be seeking to fill the remaining 15 months of frank lautenberg's term in office. he died back in june. john harwood joins us this morning from washington with a little bit more on this. maybe some other thoughts. what does this mean? nothing? zero? >> yeah, because we knew that cory booker was going to win this primary. we know he's going to win the general election. he's going to win it so easily, that chris christie didn't want to be on the same ballot with cory booker when chris christie himself is running for re-election. he will also win. but there is no mystery about this. this is a state that is very democratic. you would have to have some sort

of republican star like chris christie himself to challenge somebody like booker. and so this is a seat the democrats are going to get back. and then we're going to have a fight over, you know, a half dozen or few more seats to see whether republicans can pick up the six they need to win a majority in the senate. >> another washington question for you, the president apparently next week after his vacation, i don't know if he's going on -- he's on vacation, i don't know if he's going back to vacation later, but apparently he's going to do two more economic speeches. what is that about? >> not only two more, he's going to continue doing a long series of speeches to try to advance his priorities. he sketched this out before he went to martha's vineyard, long before, really, and said essentially that at a time when congress is not cooperating with his priorities, he is going to go to the american people, sketch out what they are, try to win arguments, maybe you get a little headway with republicans in advance of the fall battles

we have got over the continuing resolution, keeping government open over the sequester, over the debt limit, but he's really, even looking to the longer term and hoping to shape the priorities of the american people and politicians down the road for more spending on his priorities, infrastructure, job training, education, all the things that he makes the argument are necessary to build a prosperity from the middle class out. >> what do you know about this? the wall street journal story, now into the yellen/summers debate, that says the following. surprised and irritated to see senate democrats touting a preferred candidate for federal reserve chairman. white house officials have moved behind the scenes to quash the campaign and are insisting that obama not be pressured as he mulls to nominate. >> the president does not like people trashing those he is seriously considering for big jobs. he plainly likes larry summers.

there has been a campaign against summers within the senate. you had a significant block of senate democrats who were signing their names to a letter, essentially endorsing yellen. democratic senators have publicly raised questions about whether larry summers would fit in that job. and the president doesn't like being hemmed in. we have seen this at his press conferences. saw it when he went to the hill and talked to democrats and defended pretty forcefully larry summers as somebody who had helped him a good bit, who has a lot to offer. he has been -- summers has been believed to be the front-runner for the job. don't know to what extent that is still the case. but the president doesn't like to be dictated in these sort of scolded his democratic colleagues. >> we have been looking at this, this opposition in the senate and other places that have been brought up. we have been looking at that as kind of, well, maybe that would make the president step back. does it make it more likely he

would nominate summers. he doesn't like being told what to do? >> he didn't like that when susan rice was getting pressured by republicans over benghazi, when -- >> in the end, he did not nominate. >> that's my point. that's my point. that he forcefully defended her. he said the attacks were out of bounds, like he's done for larry summers. but he ultimately decided discretion was the better part of valor. he went to john kerry. he may do the same thing this time. larry summers could be confirmed by the democratic senate. i think there is no doubt about that. but so could janet yellen and the president has so much political capital, he has to decide how to spend it. >> john, isn't there some history of the president coming back from vacation and making appointments? is there any chance at all we get a name after this vacation? >> you mean, like next week? >> i guess. >> i think very low probability of that. i think the president has indicated it is going to be this fall and i would expect it to

come september, october. >> john, the view from washington. thank you for that. >> you bet. >> appreciate it. >> some question if this comes before or after the next fed meeting, which is the 18th, is when the decision comes out. >> september 18th? >> yes, speculation, that, let bernanke get through the last meeting and then nominate his replacement. coke launching an ad campaign aimed at convincing consumers diet soda is safe. why jim cramer says now is the time to buy on the european story. first, as we head to break, let's check on the national forecast with the weather channel's alex wallace. good morning, alex. >> good morning to you. much better morning across the northeast where we have been dealing with some wet weather move through yesterday. now what is left of it moving out over the open waters. so the cold front that blasted through, well out to the east. that's allowing for cooler, more fall-like conditions to set up. so high pressure is building in. we'll see a lot of sunshine through the latter part of the week. and very, very comfortable

conditions out there. some of the best weather we have seen in some time. temperatures from the midwest, northeast, even into the south going to be cooling down quite a bit. numbers anywhere from 10 to 15 degrees below our average. while all that is going on. we have some storms to deal with, we'll deal with the threat for severe storms out across parts of the front range. we do include denver, the mile high city, threats out there for the day damaging winds and a bit of hail and with any of these storms, very heavy rain and frequent and dangerous lightning. we'll be careful here out across the front range. that's a look at the forecast for your wednesday. more "squawk box" coming up in just a bit. weekdays are for rising to the challenge.

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time now for the "executive edge," this a daily segment focused on giving business leaders a leg up. first up today, coca-cola. the company is defending the safety of artificial sweeteners. the print ad will run in usa today and the atlanta area, followed by other papers next week. the company says the diet drinks can actually help people manage their weight. and the ad stresses scientific evidence showing the safety of aspartame, you probably know aspartame as nutrasweet.

>> i don't know. i guess the viewers do know this, sometimes you see it -- i drink it every morning. this crazy hour, i know some people think that's disgusting that you're supposed to be drinking coffee or something else like that. i can't figure out if these ads are meant for me or for real consumers or meant to say something to government officials and sort of public policy. i can't really figure out what's going on here. >> criticism has moved. it has gone after not just the sugary drinks, but in some cases the low calorie version, the diet version of some of the drinks too. and if you actually look at what the consumer is doing, it is reflecting a change in consumer taste. i think the diet coke and diet pepsi, sales have fallen much more quickly than the sales of regular coke and regular pepsi. i think it was down 1% for coke last year in terms of volume sale, down 3% for diet coke in the united states. if you looked at pepsi, down 3% for regular, and down 6% for the diet versions of it. >> a lot of people moving -- >> water or water-flavored

drinks that route there. >> people also moved, and i haven't gone with them so far, to, like, coke zero or coke -- some of the other ones where they have some sugar in them, or but they don't have -- they don't need -- they don't use nutrasweet. >> how do you get zero calories with sugar in it? >> the question is whether or not it should be the companies providing this nutritional information. >> if you're a company if there is scientific numbers that back item, scientific data that backs it up, why not? i would make sure i was making up every effort, especially if i thought i was being maligned by people who had wrong information. >> but does somebody need to review the science presented by the companies? >> i don't know. i think anything in moderation. i've never been all that worried about diet coke or diet pepsi but i don't drink it every day like andrew. >> i try to switch it off. the other thing i liking, to be care to both brands, pepsi makes a starbucks drink called refreshers, which is awesome.

>> huh. >> little morning plug. anyway. >> wow, okay. let's move on to the next story. it might sound like science fiction, but it is a reality in south korea. an electric bus that charges its battery while it is driving down the road. there is no need for the vehicle to sit idle on a charging station. researchers s s actually constrd a 7 1/2 mile track with specialized electric cables designed to power batteries on a moving passenger bus. i don't know how it works but i sa it earlier this week. i tweeted something like look out for the third rail. >> it is awesome. when musk's cars go forever, but i don't know is the ultimate infrastructure cost, because i imagine -- >> this was a 7 1/2 mile road. >> that putting down this wire in the ground costs money, and then you actually have to power it. so the question would be if you want to do this at large for everybody, how you would bill people. it could be complicated. >> interesting experiment to see how it work and maybe watch it over time and see how they can

refine this and check it out. no? >> i'm game. are you? >> comes down to whether or not the government wants to fund such a thing or if they're away from the private sector to do it. lots of good technologies, things that take huge amounts of capital in order to make them work. i could, however, imagine a car chase that goes off road, and the criminal battery runs out because he's on a road without the -- >> i like that. >> you're moving way down the road on that. >> you get the helicopter over there, oh, my, oh, my, his battery has run out. that's it. >> i want my iphone to go all day. if they can't figure that out -- >> wasn't tess thela the guy ths broadcasting electricity? >> yeah, but -- >> not tesla, an inventor, can't remember his name. >> who wants to broadcast electricity. >> no, back in the early part of the century. had a big thing -- wasn't anderson. it was the guy who opposed

edison. >> westinghouse. >> no, no. tesla. there is tesla technology out there, it is a huge thing, under the radar thing among scientists. and i think he's the one who beat out edison on the ac/dc thing. >> he was the one who -- westinghouse was supporting ac, edison was supporting dc. >> westinghouse got the technology from tesla. maybe i got my history of science wrong there. >> something about this on npr this morning, they were talking about the elephant and westinghouse and tesla was fighting over and got electrocuted in the big debate. >> i want more on that story. >> it is an awful story and a book out now about it. let's good to the market moving comments with jim cramer. he said europe could drive the next leg of the bull market, noting the markets in portugal, italy, ireland, greece and

spain, the pigs, they are flying. they're up double digits since the two-month low in june. listen in. >> the turn in europe happened so twistly that u.s. companies just reported begin to seat strength only in the midpart of the quarter. that's right. they saw the strength only in midquarters, taking companies so by surprise that they're mostly in disbelief. most notably the gigantic auto companies like ford and gm. >> it is really something to think of those markets being up double digits since then. this is all relative to expectations. but a quick turn and that comes at a great time for here in the united states. >> hthis is a huge story. there is skepticism and i'll throw a little cold water on jimmy's idea, which is that the whole peripheral europe story has been quieted ahead of the german elections. and michelle caruso-cabrera's contention, this story explodes post german election, sometime

in september, and these issues haven't been solved and they will involve again another huge debate about bailouts and whether or not there is additional capital that is needed or capital infusions into those countries. so it looks good now. and i just was looking at something like six quarters of negative gdp numbers in europe and now you get a positive one at a 0.3, a little early to call the end of the recession. the upside of that one, you think about it, japan is growing. the u.s. is growing and europe is growing. and i have to go back on my tables here and find out the last time all three countries have been positive. >> we will talk to jim cramer later this morning too when we check in with him. when we come back, we'll talk housing and inflation data. they're set to dominate today's economic calendar. we'll talk about market expect takings after this. first, take a look at yesterday's winners and losers. she knows you like no one else.

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[ male announcer ] so come trade at the place that's all about options and futures. optionsxpress. open an account today and get a $150 amazon.com gift card when you call 1-888-280-0154 now. optionsxpress by charles schwab. welcome back. let's look at the markets. rich steinberg is the president chief investment officer. peter bane is ceo of old mutual asset management. rich, let me start with you. we have been up. we have been down. any clear direction here for you and what is the thing keeping a cap on the market, making a directional move either way? >> i think a couple of things, steve. i think we're going to be in this kind of treading water area, at least until economic

data starts to come in in september. i think what is really keeping us stuck in this kind of 1650 to 1700 range is valuation at $1 $110 15 1/2 times is probably right for the market until we focus on 2014. i think we're going to be there until we see what the numbers come in on september 6th, which will be the unemployment data. if it comes in really hot, in yields spike, we have to just see how the market reacts to that. i think we're going to tread water for a while. >> is it your contention that 15 1/2 is over valued, undervalued or just about right? >> the five-year average is 14.8 roughly. so, you know, i think anywhere between 15 to 16 is probably the right number. unless we see economic growth really pick up, you know, subpar dproe growth, earnings for next year, analysts are probably too off the mioptimistic.

but until we start to get a little bit better revenue growth, which could happen from europe, if cramer is right and we're seeing a turn there, but i think we're too early to see that also. >> peter what is your estimate for where the s&p ends the year and how about 2014? and also your take on whether or not 15 1/2 times earnings is too expensive. >> i don't think it is too expensive, but i think rich is probably right. i don't see multiple expansion. i think if there is fogoing to growth, it is going to be earnings driven. you're seeing a little bit -- the lull everybody is talking about now is we just finished the earnings season, nothing was particularly compelling either way. earnings with were fine. we were disappointed by revenue last quarter. ref venue is better this quarte. the t-word is creeping back into the conversation. >> 6:36, we haven't said the t word yet.

>> is t word the taper? >> there it is. >> it was a taperless show. >> it was a taperless show, until now. last time we talked about this is when the other current phrase, the taper tantrum, we had if june. people took a breath and stepped back. what people need to remember, bernanke has been so clear about the criteria for tapering. he's been very transparent and ultimately tapering is something the market should want to have happen because it means the underlying economic conditions are sufficiently strong that the fiscal policymakers can begin to decouple themselves from core economic activity in the market. that's a good thing. >> you mean the monetary follow policy. >> fiscal and monetary policy. >> is the taper built in? and how much economic growth is built? it can't be that the market is trading on a zero number. when you said if there is economic growth, the market can move higher. there must be some expectation in the market already, rich.

>> i think if you look right now about 65% of economists expect the taper to begin. i believe the number, $20 billion to cut it back to 65. i think that number, if we in fact get it in september, i think the magnitude of the taper, i have to now put a dollar in the jar for saying taper, is -- >> up to $8. >> i think it will be the magnitude and the -- of that taper. listen, you know, i think it is going to be hard. the gdp growth came in, what, about 1.7% or something like that for the first half. and, you know, we're at, like, 2.5% for the year. that may get hard unless we sergeant to see revenue growths and revenues will end up driving earnings. >> that 17 is looking like it will be revised to 23 at this point, maybe 24. you maybe want to add back to get a real view of the economy.

the .7 or so of a percent that the government is subtracting. at the end of the day, it may be a 3% economy. >> my target has been 2%. if we're 2% growth or better, you have the ability to begin to decouple monetary policy. you can begin to taper and the underlying activity will support it. >> how are the earnings forecast right now? do they need to come down? are people realistic about -- >> i talked to our managers and we have value equity, growth, small cap, all of them feel reasonably bullish about earnings, i don't think any of them are saying they're scaling back what they're looking for in terms of growth. i think the market will grow. >> rich, last word to you. >> you can see where people get to this 1780, 1800 target which would be 15 times 100 and 21, that's an okay market for next year. i think investors just going to realize going into next year, we could have a single digit return and we're not going to have outsized growth unless growth really picks up in europe and, again, in the emerging markets.

>> rich steinberg, peter bane, thank you for joining us this morning. >> good to see you. this morning's earnings headline, macy's, the retailer set to post quarterly results before the open. we're going to get a preview from the street. that's coming up right after the break. right now, 7 years of music is being streamed.

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welcome back, everybody. macy's will release quarterly results later this morning and we could get an early read on

the back to school shopping season. robert, i know that macy's hasn't given guidance for this particular quarter, but what are you expecting? >> we're expecting a pretty much inline quarter for eps. but i expect comps to come in a little light. i think the street is somewhere around 2 to 2.5%. but the trends in the department store, sales trends in the department store area have been kind of weak, trending weaker in june and july. >> what is happening? why do you think the trends fell off in june and july? >> it is just something we have seen across the board in the consumer area, where the smaller ticket purchases are -- have been a little weaker, while your large ticket purchases, say, washers, dryers, automobiles, have held up pretty strong. basically anything you can borrow money or need to borrow money to purchase have held up much stronger than the smaller ticket purchases. >> what do you think is happening with consumers? they feel less confident about things they may or may not need in terms of clothing, things

they can put off buying? >> yeah, i mean, part of that has to do with the weather, with the sales. promotional activity hasn't -- didn't really kick in until later in the quarter. and consumers have been trained to wait until there are more attractive prices, wait for the prices to come in, and that's when they hit the malls and start buying. >> what about the back to school season. do you think that is also going to be a weak season? >> so expectations for back to school are pretty low at this point. and really what i'm doing and most of the consumer analysts are doing is we're waiting to hear from management what the companies are saying about back to school and what will happen during the holiday season. >> i know you think macy's is still the best position of those midtier department stores. we watch everything with jcpenney and what is happening there. does the chaos at jcpenney continue to help macy's? >> yeah. i like to refer to jcpenney as the gift that keeps on giving for macy's. as long as macy's continues to

block and tackle and execute their business, they continue to gain market share without really having to try that hard. and i'm not saying they're not trying hard. i think what macy's has done over the last ten years has been incredible, reducing store base in half, and really without losing that much market share in the department store space. >> pretty incredible when you look at the comparison of those two stock charts. would you buy macy's shares here? >> i think macy's can work higher, but until they really have some type of store expansion or until their e-commerce business contributes a larger part of overall sales, right now e-commerce is doing really well, part of the omni channel strategy, but it is only about 5% of total sales. but, still, i think you can work higher to the mid-50s based on getting up to 440, 450 a share for 2014. >> okay, robert, thank you very much for joining us. >> thank you for having me. >> coming up, the justice

department is challenging the american us airways merger. if you just glance at the papers this morning, everyone has an opinion on this story. andrew does. i do. and so does becky. >> you know what they say. >> exactly. >> they all stink. >> you'll get one when we come back. "squawk box" coming right back. [ male announcer ] come to the golden opportunity sales event

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persing square activist resigning from the board of jc penney. >> i just got off the phone in an exclusive issue by saying i elevated a bunch of issues by making them public. >> trying to gain the state of the consumer. >> 50% of growth came from those three companies. >> look at the chinese market. it's just starting to peak o.those are really good economic numbers, and can you see the effect this is having on the stock market. get the point? china is hot again. >> welcome back to "squawk box."

shares of amr corp and us air getting slammed after the government moved to block that merger. we want your perspective on this this morning. michael, should this deal have gone through, and now that it's not, what ultimately happens? is this going to increase competition, prices are going to go down, or is one of these companies going to end up like pan am or eastern airlines? >> probably none of the above. both airlines are healthy, but they could be a lot healthier put together. i'm a knee jerk opponent of mergers. i wish they were never done, but i also like studebakers and they are not coming back eitherch the reality of this whole thing is not so much competition because airlines are going to ratchet down the capacity that they have. the issue is what we look at when we look at communities is how much access do you have to the rest of the world, and there are four dozen small communities that will get american airlines branded service out of this deal giving them access to the rest

of the world a whole lott lot better than today, including virginia and i have no idea why they are opposing this. overall would the consumer be better off after this, yes, but will fares go up, bank on it, regardless. >> a lot of people try to divine when the justice department go after this deal and let's every other deal before this. i saw this in the papers this morning. apparently the ronald reagan national airport in washington, d.c., this combined company would have a monopoly of 63% of the non-stop routes, jetblue which has slots there, which are owned by american, they would cancel those leases. how much do you think that incentivizes the way people think about this? >> well, what people are missing, including some consumer activists. yeah, if you get this combined entity to divest those slots at national and give them to say jetblue or southwest, that means bangor, maine, will lose service to washington national because

those two carriers that don't have equipment to serve bangor. places like sarasota will lose service so smaller communities will get shafted by that kind of a divestiture at this point. it's understandable that people would say that but they have to look beyond that and in terms of the consumer as i pointed out a place like lynchburg, instead of having only access to the u.s. airways system will have access to the entire american airways system. >> what's better, price or access? >> access, getting a low fare to go ride dumbo to bring in a job but getting enough service to get mr. jong here from taipei does. >> it feels like air travel has gotten worse, that the experience of the consumer has deteriora deteriorated. in part that's because of capacity declines. my question, is and you seem to suggest that stopping this merger will not do anything about that trend. do you think that was a part though of why the justice department acted here? >> it might be because they are

so misled on this and have such bad data. the experience of flying, it's like going into a minimum security prison these days. i mean, having someone use your name and say thank you is off the wall here. it just doesn't happen. that's not going to change with this merger, and we could get into service issues where airlines really need to work on it, but the reality here is places like hiltonhead will now have better access. >> right. >> and i hate mergers. i don't like them, but this sort of thing right now in terms of business for small communities and their economies, it pains me to say it, but this merger would be good for that. >> i have to say, i've been really opposed to this, too, and michael, those comments are the first that i heard that actually sway me towards the opinion that maybe this isn't an okay thing. >> well, thank you. >> honestly, i wrote a column for "fortune" suggesting they should stop this, too, because of what steve was talking about. if you're saying this is going to be an issue for small communities, why isn't anybody out there kind of championing that opinion? >> because there's not a belief

that there's an airline store out there. hiltonhead is trying to get a secondarily. they will get elvis before a secondarily, but with this merger u.s. air becomes american and that means the hub at charlotte will definitely grow and that means better access. we're beyond the point of hoping to get low affordable air fares, air transportation doesn't work as well as it did in terms of the economy for small communities, so the whole issue is can i get mr. jong here from shanghai. >> i don't understand the access issue. i would think in there were three or four airlines they would cut access to towns and cities. >> and seats. >> to towns and cities to -- >> i don't get the argument. >> where it's not a profitable route and there's a bigger issue which is there's big airlines and the regionals which actually serve a lot of those cities. >> time-out. regionals don't exist anymore. regionals are now leasing airplanes to big airlines and southwest is not a regional. they are now a network carrier, but when i say access, that means you can go to charlotte

and instead of just having one flight a day to sao paolo there might be flights to all over south america because american owns south america. bangor, maine, would get service to america's hub at chicago. that's slam dunk, that will happen. they won't get it without this merger. that will give them more access. >> u.s. airways ceo still expects this deal to close by the end of the year. do you? >> i don't know. i'm not a lawyer. but guess what, the legal industry just got a big boost by this deal. >> okay. michael boyd, thank you for sharing your view this morning. >> thank you. >> it's an interesting one and we'll see where this goes. a lot of people have views on what to do here. >> when we come back, we do have quarterly results from deere due within minutes. the numbers and instant analysis straight ahead. "squawk" will be right back. ea. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub.

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good morning and welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with becky quick. steve liesman is joining us this morning. joe is off today. >> yes. >> not that joe is off. >> yes that you're here. >> and very excited, and dan is here and becky is here. fantastic. >> thrilled to have you. take a look at the markets. setting themselves up. hoping that that red hour turns itself around. dow looks like it would open up a point and a half off. >> again, we'll pretend it's under for the moment. wall street still buzzing over carl icahn's latest investment. more than a $1 billion stake in apple. icahn calling apple undervalued and saying an increased stock

buyback could push the shares up to $700. icahn said he had a nice conversation with ceo tim cook and that they plan to speak again soon. becky has some breaking news. >> deere earnings are out. looks like the company came in with numbers much better than expected. deere coming in at $1.56 a share. the street was looking for 2.17 a share, came in with much better revenue than expected. revenue was $10 billion. the street was looking for $2.8 billion so this looks like a strong beat. looking for some of the comments. john deere is well on the road to another year of impressive performance after reporting record third-quarter results. that's according to the chairman and ceo, sam allen. they said sales and income for the period were higher than in any prior third quarter. they say it's a reflection of considerable strength in the farm sector, especially in north and south america. they are also working further on executing some of the strategies that they are talking about and keeping a close watch on costs and asset. again, this is strength in the farm sector especially in north and south america, and this is much better than the street had been expecting.

can you see the stock is up 3% in the pre-market trading. >> also, a little bit of an executive suite shuffle going on at zynga. three top executives have departed. chief executive officer david coach and the chief operating officer lee and colleen acrary, a major reorg by don mattrick who just took over as ceo last week. earlier this week and now a response. aol chief executive tim armstrong now apologizing for firing an executive in front of hundreds of workers. average strong had fired the creative director after telling him to stop recording a meeting. we played that tape for you earlier this week. armstrong said that lenz had been previously told not to record confidential meetings but added he treated lenz unfairly on a human level and said he was taking responsibility for the situation. also more news on bill ackman this morning that we should be

talking about and his departure from the jc penney board. the "wall street journal" reporting that the retailer's board told ackman that he breached his board room duties by disclosing information about the company's financial position and search for the new ceo. ackman spoke to charlie rose yesterday about his resignation. >> i'm getting off the board. i've achieved all that i can achieve on the board. i think that we can restore some peace in the board room, but, you know -- >> mike stays. >> mike is in as an interim ceo, a search process is under way which will hopefully identify a good ceo for the long-term business. >> shares of jcp down 12.68. they lost ground did, not gain ground, somewhat surprising given all the conversations we were having yesterday morning as the news was breaking. becky has some other breaking news. >> breaking news out of birmingham, alabama, the faa is confirming that a ups cargo plane has crashed there. it was around 6:00 a.m. this morning. there's no information on

survivors at this point. no information on this, but according to local news and a crew there the plane is burning, and the crew is not allowed to get closer due to explosions. there have now been at least three explosions. there could be debris covering half a mile. again, this is a ups plane, and it's said to be an airbus 300 that was coming, i believe, from louisville. we'll give you more on this story as we continue to get updates. that's the only information that we have at this point. meantime, let's talk some more about carl icahn's investment in a. joining us on set is reuters head of global programming, and, dan, this carl icahn news on apple coming after everything we've heard from icahn and from ackman and some of these activist investors, i mean, look, this is a big shot of news in a traditionally slow period of time. >> one, a great character-driven market. i was on a few months ago complaining there's no character. we're right back in the thick of it but the icahn apple thing

makes me sad. it feels like apple is no longer magic, something to be toyed with by guys like carl icahn, smartest guy in the room, admittedly, but when you're buying apple for a buyback and not buying apple for the next big thing, the thing that will change my life, your life, that the kids are going to want, you know, that's the magic of apple. that's what got the stock to where it is now, both on the good side and bad side and makes you wonder, you know, tim cook, dicy situation. what do -- >> i mean, is that a surprise when you look at the value that's been lost in the shares just over the last year. >> yeah. >> i mean, is it a surprise that you see somebody like this getting involved? >> i'm surprised icahn is involved quite frankly because i think that the company has too much baseline support for icahn to do what he usually does in these situations, but then again, he's on such a role. >> right. >> that it's a benediction, you know, for apple. >> can we just hold it. i mean, what is the possible justification for apple sitting on $137 billion of cash?

i think icahn is absolutely right. i don't think it has anything to do with innovation or technology or anything. they are sitting on cash. they are a ripe target, no pun intended. >> i didn't say he was wrong. i said it is a transformational moment how we, the world, the market thinks of a. we've gone through two years since steve jobs passed, right, almost two years in october, so this realization has now set in, and this is kind of the inflexion point for apple. it's now just a stock. it's no longer that thing. >> i can think of apple as an innovative company, an innovative company sitting on too much cash. both of those thoughts can be in my head at the same time. >> go ahead. >> you can look for apple before this. let's say if you really believed in apple as the innovator of all time, you can see them making a transformational acquisition with that money and buying a media company. >> hold it, again, no, no, no, no. i'm not getting you get away with that. give me a transformation ak-al

acquisition that costs $137 billion. there is none. i did the math what they could buy with that money. if they cut it in half they would have double of what they need. >> two and a half years ago we wouldn't have been questioning. we wouldn't have been questioning it the way we're questioning it now. wouldn't have been questioning steve jobs. we're questioning tim cook. >> i'd question steve jobs just as surely as i would tim cook. >> help me out. >> i'm not going to hip out. >> i want to understand. >> i don't lost cash sitting there, but what i really don't like is to think that carl icahn knows anything, absolutely anything, with respect carl, anything about the computer industry despite the fact that he got ten cents extra for the dell shareholders by holding everybody hostage which is what he does, i don't understand this. >> i'm with you, andrew. >> i'm sorry. you're talking about short-term distribution, that's what this is about. >> and just like george clony

talking about dan loeb. >> because apple is a technology company icahn cannot question the balance sheet. that's not right thinking in my opinion. icahn has a right as a financier. he's an expert financier, to look at a balance sheet and say, you know what, right along the lines that dan was talking about. >> do you think he'll be a shareholder for five years in. >> seven minutes. >> he'll be there for a hot minute. >> he'll get his money and get everybody excited for no reason, they will distract the hell out of the management. >> put the money to work. >> and everybody will say he's done a good job. >> it's a sociofinancial inflexion point. >> i don't know if i agree. doug cass points out that icahn's stake is about $1.5 billion. sounds like a lot of money, but when you look at that relative to the valuation of company of $450 billion. >> right, but nobody looks at that. >> the point is icahn is not going to get a whole lot of play out of it. got a big pop, the market cap

was up about $12 billion yesterday. >> and apple had had a stealth rally going. when i was talking to the producers, one thing i wanted to talk about was apple's stealth rally. >> they were doing this. >> i say give me the money or justify why you're not giving it back. tell me what that transformation al acquisition is, tell me what the money is for. just because you're in technology doesn't mean you don't have to explain it. >> they can say go away if you don't like it. >> that's not the way it works, becky, i don't think. >> you're not a shareholder. >> a lot of that money is overseas. what do you want to do with it? want them to bring it back? >> waiting to find out what happens. >> that's a huge issue. >> i want a bite of the apple. >> i'm not sure there's one transformational deal in here. i actually think potentially there's a multitude of transformational deals. when you talk about $137 billion spend 5 billion on one thing and a billion here.

>> macha, kind of an interesting transaction. >> contract money. >> dog track money. >> what? >> dog track money, and you think about it like this. how much does your parent company pay in carriage fees to cable networks, right? >> i don't know the answer to that. >> it's a $3 billion industry overall. >> maybe apple tv's next iteration will be buying content and paying content providers, maybe there's another apple going on. >> we debated the past week that ultimately a google or maybe even an apple decides to get in on sports. the big transformation in broadband would be someone to bone you up $2 billion to care et the nfl >> you haven't set a single project that has double digits to it. every single thing you said, talking about triple-digit numbers. >> you want triple digits. >> you're so out of the way of the justifying. >> sprint. >> sprint. >> that's what you do. >> can i make another point? can i make another point? >> you buy your own carrier. one more point. if there is a project that is

viable, there is no reason apple could not finance that at a very, very lucrative rate. it does -- well, i said what i had to say about it. >> 27.5 billion. >> it should go and that's part of the way the market works, make them justify it. maybe they are right, maybe they are wrong. maybe he walks away with money and maybe he doesn't. >> but does that distract management from all the bigger issues when you have an activist investor at your doorstep? >> i think what you do with $137 billion is not a distraction. >> 145 billion. >> i think the bigger question is how does carl icahn define a nice conversation? >> dan will be with us for the rest of the show and we'll have a lot more on this. steve? up. >> next, the road out of a recession. i think it's an early call but the eurozone did turn a major corner on its trip out of recession. we speak about the state of the

global economy and here's today's yahoo! logo update. >> i'm not digging it. >> what is the source of that? >> eight of 30 days of change. >> putting one every day that they are not using. n tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together.

welcome back. supporters of the post-egyptian president mohamed morsi securitying with security forces in egypt. protesters hit with gunfire and tear gas. two members of the security forces are reported dead as long as many as 25 protesters. the clashes took place at two different sites. we're following the situation and will bring you updates throughout the morning of what's going on in egypt. andrew in. >> also taking the pulse of a european -- the european economy now through the eyes of one of its largest consumer products companies. joining us on the set is henkel's ceo. told us, you're wearing right guard, one of your products and use dial soap, another of your product and what do you use on the hair?

>> steve, do you use that? >> you invited me on the show. >> european economy, we're supposedly out of a recession. do you buy that? >> not really. we grew 4% in the last quarter and 0% coming out of europe. 28 million europeans are unemployed and not bad news does make it good news. >> and when you look at sort of directionally where things are going, most of your business -- your biggest business is actually in china right now. >> the largest country in the world is the u.s., second largest germany and third larger china and fourth largest russia so we continue to see our growth coming out or high growth, double-digit growth coming out of brazil, india and china. russia very strong. solid growth in the u.s. but not quite as strong. >> what kind of numbers are you seeing in u.s. relative to europe, relative to asia? >> europe is at zero. u.s. is between 2 and 4 and asia is double digit. >> i'm surprised by that. you know, there was a whole view that a number of u.s. companies

had cut back too much in europe because they didn't think that things were growing enough. did you guys cut back, too, or no? >> no, we didn't. i think europe has a very, very long way out of the recession. been there for a couple years and our anticipation is the overall european economy will not see any growth in the next three to five years. >> how sensitive are you to growth in begin with? >> fairly sensitive. >> in soap and -- >> 50% of our business is adhesives. we're the largest industrial adhesive company in the world so we're very sensitive to automotive, electronics and aerospace and besides germany you're not seeing a lot of industrial growth in europe. seeing that coming out of asia and some coming back to the u.s. >> there's some talk that right now the european story is quieted ahead of the german elections and this story will really become a front page story. is that your expectation, the peripheral europe. >> i think what you're seeing is nothing is really happening in the world right now, so no brave decisions are taking and that will not happen before the german election.

i think we might get a stormy fall and i don't see any real change in the european economy or real growth in the next two to three years. germ hi has to step up and make certain some positions and the european union which has been blocking and tackling have not taken any major decisions of getting europe back to growth. >> different question then. the investment community, all anybody is talking about how europe's stock market is outpacing the u.s. market and as a result you're seeing i think retail for the first time now jump into europe because they didn't know what to do before. does that make any sense to you? >> in our opinion we do 45% of our business in the emerging market and we don't believe, as i said, the growth is coming back to europe so i don't see that making a lot of sense. i think the growth is coming in the emerging markets and the u.s., not europe. >> what about china? >> continues to be very strong, double digit, so the growth gdp at 7%, 7.5. >> double digit but still very strong. >> has the recession forced some of the industrial powerhouses of europe to kind of reconcile themselves, reconcile costs,

reconcile situations that get them ready for when you start to see glimmers of hope? is it a better market to be in than an economy in terms of have they just gutted it out or built in such deficiencies that they can move in? >> they have reconciled it for four years because that's how long it's been going on. >> can i ask you, growth in emerging markets versus growth in developing markets, it's a very different story for you. when i think about the urbanization of places like china, is it true that in some cases you're getting people to use these products for the first time as they move into cities whereas in veltd countries it's a different story when it comes to growth. >> it is. if you look upon china, you've got to separate into industrial, been there for a long time. if you go to consumer behavior, 2% of the chinese populations today use deodorants. >> only 2%. >> so it's a completely unsaturated market and that, of

course, with the urbanization will dramatically drive growth over the next many years to come. >> what are some of the other products that aren't used in china? do they use some of those packaged detergent soaps? >> no, but if you look upon penetration of washing machines, probably 1% to 2%. >> 1% to 2% of the whole country. what else? >> dish washing machines at 1%, they still do handwashing. >> that's amazing. >> your business is growing like crazy and jim chainios came on the show and said the whole country is a fraud. >> i can't say it's a fraud. we've been in china since 1990 and we continue to see strong growth, but the price you pay for growth is volatility, and in those countries you'll have high volatility. we don't see that. we're not seeing what you mentioned but a strong china slightly slowing down over the past couple of years but our expectation is still very bullish when it comes to china. >> are you there in a joint venture or there by yourself?

>> we're there by ourselves. we have 17 manufacturing plants in china today. >> kasper, thanks for coming in. >> i thought you couldn't do business in china these days unless you have a partner in many cases. >> no, it's changed. >> changed in a significant way. >> ceos have told us it's easier to do business in china than india. >> much easier. india is terrible to do business in, no infrastructure, very complicated legal system so very difficult to get any decisions done. >> the same market penetration issues in india as in china, or is india further ahead? >> further ahead, further ahead. >> okay, good. >> i will switch to right guard now that we've had this conversation. >> thank god. >> easy way to boost your workout performance. >> what do you mean switch to? >> hold on. just so we know, aluminum you think is bad, people put aluminum, not good for you? >> i think not using right guard is bad. >> okay. we've got details about that story after the break, and then the fall shopping season just

here. retailers are hoping for a cooler than normal temperatures. courtney reagan is going to join us with that story, plus a preview of macy's earnings, plus more on that tweet that boosted apple stock yesterday adding $12 billion to the company's market cap. carl talks and money moves. we're going to be right back after this. >> how much did "mad men" pay to use the beatles iconic song "tomorrow never knows?" the answer when cnbc's "squawk box" continues. elping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪ you got it! you got it! yes! aflac's gonna help take care of his expenses. and us...we're gonna get him back in fighting shape. ♪ [ male announcer ] see what's happening behind the scenes

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drink around and then spitting it out actually boosts perform an. the study found during an hour long workout cyclists who swished carbohydrate-rich sports drinks like gatorade for longer covered more distance and felt more tired than after a five-second rinse or rinsing with water so you may wonder how this all works. it turns out that brain scans show specific regions light up when cautious are in your mouth. the longer you rinse, the more time the-s have to stimulate sensors in your brain so swishing is most beneficial during relatively short intense workouts and gives you a performance boost of about 2%. >> that's better than drinking it? >> still disgusting, for 2%, just keep it in your mouth. >> any comments or questions about anything you see here on "squawk box" go ahead and e-mail us at sidewalk@cnbc.com. we've been watching the futures right now. things barely mixed. nasdaq barely higher.

we'll see which direction takes shape. "squawk box" will be right back. coming up, cold temps could mean hot returns for retailers. we shop for winners and losers and preview macy's earnings. "squawk box" on cnbc, profit from it. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

welcome back to "squawk box." let get you to some new headlines. we're about an hour away from this morning's lone government economic report. check it out. the july producer price index, that's expected to show a rise of 0.3 in juan. also, mortgage applications, they fell 4.7% last week. both new applications and refinancing demands were apparently lower. the average 30-year mortgage rate did dip by five basis points. however, it's down now to 4.56%. also, and i'm gearing up for this myself, amazon.com, they are gearing up to bring grocery delivery to new york city next year. all things reporting that amazon has been posting job listings

for a 964,000 square foot facility in new jersey that's owned by an amazon partner. the company's amazon fresh service operates only in seattle and parts of los angeles right now, but i can't wait for a competitor. >> supporters of the supposed egyptian president mohamed morsi clashing with security forces in the egyptian protesters. they were hit with tear gas. gunfire was heard at the protest sites. yousef gamal el din joins us with the latest. >> reporter: it's been a very difficult hour. attempts to break up the protesters where supporters of mohamed morsi were staying happened fairly gradually and with force. this is what we've been talking about for quite some time, that many observers were worried about that they would try to do this with force, the two

different camps. one of the camps in the background a mile and a half or two away from here has been cleared already, but clashes, becky, are still ongoing between security forces and protesters in the other much larger square. we're talking about the exchange of gunfire and also, as you mentioned, tear gas. some of the weapons that were in the other camp that's been cleared have been brandished, and those include molotov cocktails and apparently gun weapons as well, so you can see that tensions are very, very high at this point and the casualty rates are actually quite shocking. the ministry of health, 15 people have died and 179 people have been injured. meanwhile, supporters of the out of the president, the muslim brotherhood, are quoting much, much higher casualties with 600 people died and over 5,000 injured, but we cannot independently verify those numbers. again, this is still a developing story. the market for the most part of

the morning has been taking this relatively in stride. they will be watching this very, very carefully because it could have far-reaching implications for the political reconciliation process, and obviously a lot of consequences for investors who are now putting their money into this country and maybe now reconsidering that, especially given what's happened on the political front. >> yousef, this is now more than six weeks of this protest, of this strife that's been taking place in this country. what's normal egyptian life like at this point? >> reporter: well, it's one that's continuously disrupted because these two protest camps had been, of course, located in key parts of the capital so that causes disruption to traffic, but perhaps more importantly, becky, the political impasse, this political deadlock has put the economy on the sidelines. yes, it's gotten a bit of a short-term lift in the last few weeks. that's part of the reason we've seen the rally in the stock

market, but nonetheless prices are rising. day-to-day life for egyptians is very, very difficult. finding jobs has become an arduous process, especially youth unemployment is a major issue here. a lot of egyptians would like to move on, and perhaps it's also one of the reasons why security forces decided to make their move. they may have seen the ongoing encampment as something that could last for months and also they deemed it a national security threat. they took their chance this morning. you can hear some of the morning the sirens in the background not a lot in cairo but in other parts of the country, clashes in different parts of egypt and also in the suez, although we want to emphasize that there are no reports of any disruption to the shipping activity. it's usually a very, very secure and fortified zone, but, again, the back and forth between the supporters and the interim government security forces continue, and we'll see where this lead, but the stakes are now much, much higher and the possible consequences long-term

remain, of course, unclear at this point. >> yousef, thank you very much. again, that's yousef gamal el din joining us again from cairo. could a chilly fall make it a hot time for retailers? court any reagan with the back-to-school update. >> steve, i know you pay attention to weather. i know weather seems like a weak excuse for poor retail sales but there could be some vo lidity for reasoning. for some parts of the country a relatively cool summer, particularly the last few weeks which could partially explain the lack of enthusiasm from shoppers about the summer merchandise. the tepid sales haven't inspired lots of confidence for back-to-school shopping but many analysts think that consumers are waiting to buy that closer to need, particularly when it comes to apparel which could be good news for the apparel-focused retailers. the weather channel's analytic forecasts this fall the weather will be more typical than what we saw last year when it was relatively warm, an extension of the hottest summer we had in 110 years. a normal fall, good news for retailers like gap, macy and

kohl's. majority of sales come from the northwest and northeast, regions that saw down numbers this summer because it was very cool. >> the sentiment change that the cool weather has caused which means all of a sudden when we're waking up in the morning and having to put on a sweatshirt and it's early august, that basically then translates into people thinking that they need to start thinking they need to get ready for back to school. >> good weather is high margin weather, need good weather to move the sweaters and corduroys, last year's warmer fall and then superstorm sandy should make it easier to beat estimates. >> 58 degrees when i walked in here and i was in a store yesterday and looking at fall fashions, okay, maybe i'd actually buy that right now. >> it's more like a sentiment shift. you wake up, put on a sweater, well, i can get into this. >> go back into the house to get a sweat they are morning. >> i did, too.

>> a bunch of states have that tax holiday on back-to-school stuff. they still doing that? >> there were 17 states that did it this year. 12 of the 17 states were august 2nd to 4th because the majority of the country, maybe i shouldn't say majority, but a lot of kids are actually back in school today. a lot of schools in ohio which is where i'm from back in school already so those sales tax hole case have already long passed. >> i was down in myrtle beach, south carolina, and the hotels were full. people had bussed themselves in to shop there in order to take advantage of the tax holiday. >> what ends up happening with that real is retailers don't end up making more. people just sort of wait and then they buy it all. >> just changes the time situation. >> shifts the timing, they don't incrementally add sales. the government ends out losing out on sales tax. the consumers win but it's hard to take that away once you start offering it. >> we'll get macy's earnings. >> yes. >> and we talked to an analyst a little earlier about that just saying that his point that what

stuck me is jc penny is gift that keeps on giving and they keep taking market share. >> a note from morgan stanley, one from barclays, both mentioning traffic from jc penney more than likely going to macy's. i'm not sure how long that's going to last. i don't actually know that that shopper is totally the same, if i'm honest. i think kohl's probably is more of the crossover than jc penney. unfortunately, it's off mall so you would have to get back in your car, drive to kohl's if you're disappointed with what you saw in jc penney which is could be more of why macy's picks up the shoppers. >> we'll talk about the tweet seen around the world. carl icahn taking a sizable stake in apple and what that means for blackberry users. i'm up for this one. "squawk box" back right after this. when we made our commitment to the gulf, bp had two big goals:

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we have more on a developing story for you this morning. a ups cargo plane has crashed in birmingham, alabama. this is video that's just in. police say that plane went down in a feel just outside the

airport perimeter. no residences in the area have been compromises, but this was an airbus a-300 plane. it was coming from louisville which is ups' biggest hub. according to a local news crew the plane is burning after most mull explosions. we don't have any information at this point on the crew or any survivors, but we are continuing to follow this story. >> okay. that's a bad image this morning. we're going to talk a little business right now. it's the tale of two smartphone makers going in opposite directions. carl icahn taking a large position in apple and saying that the stock could be worth as much as $700 a share if ceo tim cook pushed for a larger stock buyback. meanwhile, blackberry is shopping around for a potential deal. joining us on set one of our good friends, jonathan geller, ed tore, and also here is our

special guest. i went to your site when boy genius was the go to place for everything blackberry. do you think that this company can possibly be sold, and i say that even though that they come out with an announcement saying they are seeking strategic alternatives. frankly they had jpmorgan and other bankers in there for the past 12 months trying to fine the so-called strategic alternatives and thus far have fail. i don't know what changes once you put out a press release. >> exactly the same thing, as you said and i think no because anyone that's wanted to look at blackberry has looked at them in the past two years. every single major company has passed on acquiring bits or all of research in motion or blackberry so i don't think they are going to be acquired. i don't think there's a sale. i don't think they have anything that's worth anything personally. >> what about like for lack of a better term new asian money. there was some talk, you know. is it a -- you know, kind of a good brand for our emerging market powerhouse to come in and pick up and even though here we're saying there's not much

work, could it become like nokia and become the smartphone of the third world. >> there's ete and wildway and a bunch of them and-makers but, again, their valuation in their mind, i don't know what it is, it's way high. i mean, that company if you lock at what it's actually worth, you know, what are their patents worth? >> if you remember motorola traded to google based almost solely with what people thought at the time was on the pattern portfolio, not on the product. >> and that went for 9 billion, 8 billion, 12 billion. >> 12.5 billion. >> but it's different because at least it was android and very easy to integrate that into google. google always has an ulterior motorive. >> because you seem to always know product cycles and pipelines, anything that blackberry is working on that's interesting? >> no. >> okay. next generation? a next generation blackberry? >> because i just got one.

>> there is. there's a new phone that i leaked for the first time photos of, their followup to the z-10, all touch screen, a larger phone. it's coming out later this year and then they have a lower cost blackberry 10 device come out this year and that's it for the whole year. that's completely it. >> help us with this. >> can i just follow up on that. you're saying the z-10 is no good. just got one. >> it's terrible. >> why do you say it's terrible? >> it's a bad phone. when you look at what it is, it's just not a great phone. >> what do you really think? >> give me a reason here. i mean, i like the keyboard. >> the keyboard is amazing, the best keyboard. >> the best keyboard out there. >> that's all i care about. >> that's all i care about. >> but nobody is -- you're the last two. >> we're it. >> there's at least five or ten others. >> that's the reality of it, right? >> the price point is coming down, it's a volume game. >> the keyboard is great, but i think in software when you look at blackberry as a company, the reason why they have had so much trouble to this point is they

fundamentally don't understand mobile computing and software. i think that's the main problem. >> that's bad. >> so when you don't have that, your hardware is not going to matter. your ecosystem is not going to matter. the foundation is terrible and the people running it are just not up to, you know, par, with whoever else is kind of running it. >> apple supposedly coming out in september post-labor day. we'll finally see what the next iphones look like. should we be excited, should we be underwhelmed in advance? how do you feel about it? >> i think -- >> what are we going to see? >> i think we know what they will launch, a 5s, an enhanced version. >> looks like my phone. >> might be a gold color option. it's apple's strategy and it's worked up until now. i think the lower cost phone is very interesting, depending on what price point, if it's 350, 399 no contract i think it's a hit. gene munster is saying it won't have sirri, apple won't do that to their phone, it will have

everything that the 5s has. >> why does that help? >> apple has never cannibalized itself. >> if apple sells two to four times the volume of the iphone 5c they will make up as much margin as they will on the 5s. >> when does the chip get into the mac book pro? >> support it already in in. >> it's in the air, not in the pro. >> for those who don't know there's a chip that's in the mac book air that the battery -- >> you know this. >> i'm waiting. i would have bought a laptop last weekend until i figured out that this chip extends the battery life from six hours to 10 or 11 or 12 hours. it's in the air, and i don't know why -- >> why don't you -- >> i need more functionality with the pro. >> when is it going to meet? >> you're waiting for this, too. >> i'm waiting for it to be in a phone so i can use the phone all day. that's all i want. >> that's what you want. >> i want the phone to actually work and not drain the battery.

>> and they are coming out with new laptops with the haswell chip with the same speed or 50% or more battery life and i'm waiting. they haven't done it. tim, spend some of the 137 billion. >> call carl icahn. >> just tell me this, is there any chance we get a surprise? the one thing that apple used to do and what steve jobs used to do was that one more thing. >> blow you away. >> and he'd blow you away and people expected something and you got that cherry on top. any chance that we get the cherry? >> there's a chance and that would probably be in the form of a tvo watch at some point when that kinds. i don't see it happening for this fall, but it's entirely possible we'll get a preview and they will set it up for the next six to nine months. >> okay, mr. boy genius, he loves it. >> muhammad writes in he loves the keyboard. >> i'm using the virtual keyboard. >> what? >> i'm use the virtual keyboard

which has this amazing predictive keyboard. >> that's the best thing going. >> that when i think i get that, my goal is to race my 15-year-old and write a note faster than he can, and i believe with the blackberry keyboard and the predictive technology i'll be able to beat my 15-year-old. >> while we're asking tim cook for something, if you could make the keyboard have the predictive functionality. >> i would have the iphone. >> that would improve as well. >> i would have the iphone if apple had the predictive technology. >> that's because other people will get the data of what you're typing and that's apple's control and basically protecting the user's privacy so that's why they don't have that up until this point. >> there's a reason for it. >> when we come back, we'll talk about deere earnings. out earlier this hour. stocks up really sharply. we'll go through the numbers and what it means for stocks and the global economy because this says a lot about what's happening in the farm sector. "squawk box" will be right back. [ male announcer ] here at optionsxpress, our clients really seem

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box." paulson & co to buy steinway. learned to play the piano on a steinway. remember colberg and company agreed to buy steinway but says it won't match the paulson offer. they will pay a termination fee of $6 opinion 7 million. there was a 45-day go shop on that transaction. the original price, $35 a share. mr. paulson's typically a hedge fund, so kind of interesting that he wants to buy a piano-maker. >> all right. deere reporting earnings this morning. joining us right now on the "squawk" "newsline" is jpmorgan's u.s. machinery analyst. looking at these numbers, they were much stronger than had been expected, and the company itself says because the farm sector in north and south america is much better -- it doing incredibly well. how much of a surprise did this come to you, just how strong these numbers were? >> you know, honestly, becky, it wasn't really about the quarter. investors knew that the season is going pretty well this year, but because a lot of farmers had

placed orders for equipment last year when corn was still $7, i think the key that investors will be focused on through the conference call is, you know, what's happening now today and looking into 2014 that we have corn closer to 4.50 than $7 as it was at the beginning of the year, so the quarter is not as important as the output performance and spreading into 2014 in our view. >> the company has pointed out that it's spent a lot to try to get the factories up and running to try to catch up to some of the customer orders. is that a good investment in your opinion if corn is back down, or do you think the orders are dropping currently? >> i think that's the question that remains out there. farmers spend money when they have money, and they hate to pay taxes. we say that over and over again, and they laughed when we heard that, but, you know, with corn at 4.50, have a lot less cash even though there's present f-volume out there, so i think in our view it's going to be hard to beat the last couple of

years going forward with, you know, corn now back down to stay sub 5 through the year. >> up more than $3 this morning and now it's up by less than a dollar so people are rethinking some of what they had seen in the stock. one question though, is what would they say on the conference call that would convince you? i mean, what kind of order levels would you have to see to think that, objection there potentially is more upside. >> well, deere starts an early order program about this time every year for the following year and that's when farmers can place orders for equipment to be delivered next year when they need it in the spring and in the heartland, and i'm sure that's the first question on call how is that early order program going this year relative to last year and the last few years? in our view farmers are likely to be taking a step back, just revising and looking at what their needs are. they have been spending a lot of

money over the last five years. you know, we sold 4,000 combines a year for the last five years versus 6,000 combines a year for the decade prior to that, so, you know, farmers have been on a wild spending spree, and at some point they will take a step back and say, gee, i think i have enough equipment right now. in our view, we're getting closer and closer to that every quarter we go by so it's interesting to hear what they say about that. >> you wouldn't buy the stock here is what you're saying, is that essentially correct? >> that's correct. we do have an underweight rating. we think things could get worse before they get better in farmland with lower corn prices, high rent, et cetera,ents. >> great, ann, thanks for joining us this morning. >> okay. no problem. take care. >> okay. coming up, more on carl icahn's stake in a. plus also on earnings watch. macy's ready to report quarterly result and we'll have the number and instant reaction from dana telsey. take a look at the futures ahead of the numbers.

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the retail giant and analysis from dana tellsy. plus, we'll tell you what to expect when cisco reports after the well. who is winning the ral? >> i won. i won the money. i won the money. did you hear mow? i say i won. it's here, right here. >> we'll continue our what's work series with stock picks from a top rated strategist and portfolio manager. >> and breaking economic data. >> a bunch of my economists are trying to bore me to death. >> the nerd. >> we'll get the producer price index for july at 8:30 a.m. eastern. >> the third hour of "squawk box" begins right now. >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm andrew ross sorkin along with becky quick. steve liesman with us and joe kernin on vacation and our guest

host gives us perspective, dan colorusso. >> macy's out with earnings 72 cents a share and the street was looking for 78 cents and the comments from the company that acknowledged that this was a soft disappointment or soft -- softer than expected just in terms of that performance. they say they are disappointed with the results. they say they had planned the second quarter sales with a lower increase in the first quarter because of a shift of a major promotional event that even with that the second quarter sales performance was softer than expected. they say that the performance for the second quarter reflects in part consumer uncertainty about spending on discretionary items on the current economic environment. after a cool spring we've taken appropriate mark downs and customers are responding favorably. they say on the positive side they have seen a strengthening sales trend and key elements of women's ready to wear. bloomingdale's sales rebounded in the second quarter and we're encouraged by our recent

momentum, comments coming from terry lundgren, the president and ceo and chairman of macy's. >> are we tired of the consumer excuse you get from retailers? >> i don't think so. >> i think they have had years -- i think they have had years to adjust. >> but i think it's not all that much of a surprise given what's been happening, the washington policies that have changed. i don't think it's unique. if you look at gdp, it's reflective of what you see in a broader economy. >> maybe, but my sense is these people get paid to manage, and they -- they get paid to anticipate these things. >> macy's has been an outperformer. >> bloomingdale's does very good. >> you get e-mail officer day. how many e-mails a day from bloomingdales and how many from macy's? i get four. i,love the bloomingdale's. they have great data mining and they nail your shirt size but i don't buy anything.

they have to stop blaming it on the consumer and policy and broad economy and start to manage a bit more. >> the stock is under some pressure, down 2.50. other comments they are making about the back-to-school season. they say going into the third quarter they are encouraged bitterliy read on the back-to-school season. they say they accelerated receipts of fresh inventory at macy's. so they are getting new inventory. they have stepped that up so they can be fully prepared for an early start to the academic year in certain regions of the country, so they say good things about the early part, but, again, this is big to admit themselves that this is not what they were expecting. >> more on this macy's report in a few minute. news out of birmingham, alabama, the faa confirms this a ups cargo plane has crashed. police say that the plane went down in a field just outside the airport perimeter. no residences in the area have been compromised, but this was an airbus a-300 plane coming from louisville. that happens to be ups' biggest air hub and according to a local

news crew the plane is burning after multiple explosions. there is no information on the crew or the survivors, any potential survivors at this point. >> okay. we also have deere reporting earnings earlier this morning. the company posting earnings of their 2.56 per share. that well above what wall street was expecting. revenue also beat consensus on strong sales of farm equipment in north and south america. also, as we just reported, paulson and company, they will be buying steinway musical instruments for $40 a share. that news out officially in the last hour. total value of the transaction about $512 million. colberg had an agreement to buy steinway but won't match the paulson information. they will pay a termination fee of $6.7 and michelle caruso-cabrera said she is sad. steinway is her favorite stock symbol, lvb for ludwig von

beethoven. >> she's a big supporter of symphony and opera, michelle. >> supporters of post-president mohamed morsi, protesters hit with tear gas and gunfire heard at the protest sites. two members of the security forces reported dead as long as many as 25 protesters. the clashes took place at two different sites. for more on the situation in egypt we're joined by yousef gamal el din. he is in cairo. good afternoon. >> reporter: good to see you, steve. it came perhaps a bit unexpected to many. remember, as soon as yesterday really we had a lot of officials denying that any date or time had been set for a forceful intervention, and then in the early hours of this morning they made their move into two key squares in the central part of cairo. now, in one case that operation ended swiftly, and they got control of the square which is about two miles out that direction from here.

now, there was an exchange of gunfire, tear gas, and possibly more weapons as well. we cannot confirm that, but the other operation has, of course, not gone as successfully. it's a much larger protest site, and at the moment there's still clashes under way as we understand it. now, when it comes to the casualties, steve, differing accounts. we have the official account or call it the government account which, quotes, their ambulances and their hospital sources, 15 people have died and 179 injured while the supporters of ousted president mohamed morsi and the official spokesperson of the muslim brotherhood party is talking about as many as 1,000 people that may have died. now, again, we cannot confirm these numbers, but we hope to get some more clarity as the day goes by. also, of course, security forces arrested a lot of people in the square that they cleared, and we understand it may have been as high as 200 people that are arrested. the united states, of course, watching this very, very

carefully. just about 36 hours ago, they came out and they said they would not like to see any crackdown on protesters. the european union has come out and said that the egyptian leaders should restrain themselves when it comes to dealing with the situation, but the problem is, steve, that the violence is not just in cairo, it's all over the country. the reports attacks on military offices, on police buildings, on hospitals. it's a very fluid situation, a developing story, and there's a lot at stake when it comes to the egyptian-u.s. relationship, $1.3 billion in military aid which flow back to buy american weaponry with. now that conversation is going to come back out again, be it in the senate or the house of representatives, but for the moment investors today were taking the latest developments in relative stride, just the market closing slightly to the downside. we'll have to wait and see what happens over the coming hours and whether investors will feel about this the same way tomorrow. also keep an eye out for those

etfs across over there. >> okay. yousef, thanks very much. let's get a check on the markets this morning. u.s. equity futures, where are they now, down just a bit? they were flat last time we checked. nasdaq down and also the s&p down as well. overseas in asia, what kind of morning or afternoon did they have there, up strongly in the hang seng. shanghai was down about a third of a percent, and japan and nikkei up 1.3%. over in europe, let's have a look. stocks were mixed over there. up in front and germany and down in london. becky? >> all right. the markets have been on a bull run and we're continuing our what's working series with investment ideas from two top strategists. joining us right now is matrix asset adviser cio david cass and fund manager tim cunningham who carries a four-star rating. david, you think there's turmoil

between now and the end of the year but there is the potential for more gains between now and then? >> you do. basically you've had a great seven and a half months. we think the market is going to slow down. you'll have bouts of volatility, some downside risk, but when all is said and done we think the market ends higher than it is today. >> tim, i know you're a bottom's up guy so you're not paying attention to what's happening at the top. why don't we talk about some of the stocks you like in particular, one a wire card, online commerce company in germany? >> that's right. it is an online -- it's an online payments processor, and, you know, imagine you're on your favorite online retailer, and you click on a couplitens and put them in your card and then click on the checkout button and unbeknownst to you you've actually gone over to wire card who has processed the transaction. >> it's a little different paypal. it's doing the transaction, it's more of a full payment processor, and -- and the nice

part is in europe these transactions tend to be a little more complicated. they tend to be -- you know, they can be cross-border so there's currency, different tax regimes and different payment plans that people want to use so most online retailers want to outsource it to an expert like wire card, and they just pay a small percentage of the revenues. >> okay. that's good to know. >> let's talk about one of the other takes, hargraves landsdowne, the charles schwab of the uk? >> right, it's the largest and most dominant discount brokerage firm, the do it yourself brokerage firm in the uk. and in the u.s., we've already made this big transits from sort of defined benefit plans to defined contribution plans, so we've gone from sort of your traditional pension to self-directed 401(k)s and i.r.a.s, but in the uk they are just starting to make that move, so hargraves landsdowne stands to benefit for years as the biggest and most dominant do it

yourself discount broker in the whole country. >> tim, is that culture changeing? europe hasn't been traditionally an equity culture with individual investors. is that going to change, continue? is retirement the first move in here, or is this going to be contained in there? >> yeah, you're right. when you look at numbers, the people in europe are much, much less likely to own, you know, own stocks like we do here in the u.s., and i think that that's part of it. i think actually that this is going to force them, because if you think about a young person trying to save for retirement, you know, you're really forced and your best option will be stocks for the long term. >> david, let's talk about some of the sectors in stocks that you like. you say the things that you're real kind of focused on would be the financials, the industrials, energy and technology, wand that you like devon energy as one of the names. >> devon just had a very good quarter last week. we think the stock's assets are worth $90 to $100 per share. we think management is very

focused on realizing value. they are creating a master limited partnership for some assets within the next few months. very focused on doing better per shareholders and the stock is dirt cheap and improving fundamentals. >> within financials you like jpmorgan and that's an interesting call given how much focus there's been by regulators around the country. you're not worried about that. >> jpmorgan has had a very good stock price increase over the last 12 to 18 months and yet it's been in the news in a negative way almost on a daily basis. that's an overhang, but we think that the business is very powerful and sells for under ten times earnings, pretty close to book value. we think it should sell at 1.3 to 1.5 times book value. great business, 30% upside. you have to be able to turn down the volume because they will be in the news on a daily basis for some time. they just are in the regulators' crosshairs at this point. >> qualcomm, one of your favorites in the negative sector, do you get that the pushdown to lower priced phones will affect the quality and the

advance nature of the chips that qualcomm has to sell, and is it going to become equally a volume business for those guys? >> it's going to be an important component to the business, but we think smartphones will continue to roll out globally, and we absolutely think that they are, qualcomm is the winner. it's difficult to handicap whether samsung will have the hot phone, apple the hot phone or lg with the hot phone but we do know qualcomm will have their chips in each of them, and it's getting a royalty from each of them and at 14.5 times earnings with a good yield and the company buying back stock, you've got a lot of upside, limited downside risk. >> so if the hot phone is a cheap phone it's still okay for qualcomm. >> it's okay for qualcomm. want the hot phone be a more expensive phone, but we think both will be driving the overall economy and markets over the next 12 to 18 months. >> david and tim, gentlemen, thank you both. >> thank you. >> thanks for having me. coming up, macy's just out with quarterly results minutes ago. coming up next, we'll dig through the results with research analyst dana tesley, and then later more earnings to talk about.

what to expect when cisco reports today after the bell. a lot of people will be watching that. we're back in just a moment. hap. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.

welcome back to "squawk

box." shares of macy's trading lower after the retailers earnings and revenue falling short of wall street estimates. joining us now with reaction, dana tellsy, the ceo and chief research officer at tellsy advisory group. this was a miss this morning. walk us through what went wrong. >> the comp came in down 0.8%. it was a miss. expectations had been for over 2%. second quarter, you had mall traffic that was positive 1% in may, flat in june and down 1% in the month of july. discretionary items were weaker given the fact that we've seen more spending on housing and an autos and it's a miss. it is disappointing, and they obviously lowered guidance for the back half of the year. >> what does this portend for the other retailers? is this a referendum on the consumer, or is this a referendum on the operations at macy's. >> it's a referendum more on the consumer than i would say the operations on macy's. look at the pre-announcements that we've gotten already, from the teen retailers like american

eagle and aeropostale and this from department retailer macy's. consumers are focusing on home. they are focusing on auto. if you have to be competitive on price in order to make a difference, and you have to have fashion, and then lock at the other part of the release that macy's talked about. bloomingdale's improved. back to school on the early roads are a bit encouraging, so it's not all over yet for the back half of the year. >> so who is going to stand out here, dana? i mean, you've seen macy's and mentioned some of the other ones. the teen retailers have gotten absolutely destroyed the past few months. who is going to stand out here? >> the luxury good players would stand out, the results at michael kors were remarkable and accessories are worn on the outside so the label is seen. apparel on the inside. can you basically get cheaper apparel and not have really anyone see it. gap will stand out given the fact that we've seen the margins do better. they have had very decent comps. i think we'll see good numbers there, and it's interesting that some of the home retailers

should also stand out as we've been moving along given the fact that we've seen good signs there. >> given the softness on the consumer side, is there a strategy shift we should be expecting from folks like macy's? >> i think the shift that you're going to hear them talk about is managing inventory levels. i think that's going tonight key. i think we're seeing more companies chase goods in order to be able to order closer to the time of need. i think it's going to make the focus on christmas, do they have it in stock? do they have it now because you won't have a lot of goods. >> dana, how much concern do you have for the consumer here and especially relative to the tax hike in january? is that something macy's is feeling here? >> yes, i think one of the things going on, the tax hike, it was interesting because we got through the tax hike just fine. i think we've had more weather issues than tax hikes and retailers had to sell through some of the cold weather goods and spring goods at markdown prices. we have a later spring, a later summer and longer back to school and it's markdown city for

basics. if you're basics, it's marked down. >> jc penney, an earlier analyst said jc penney, it's the gift that keeps on getting. >> off prices, the other places where business should be good. >> dana tellsy, thanks for joining us this morning. >> thank you. >> appreciate it. coming up, the producer price index for july set to hit the tape at 8:30 a.m. eastern, and we'll tell you what to expect when cisco reports but first an update on the crash of a ups cargo plane in birmingham, alabama. phil lebeau, he'll be here next to tell us. (announcer) at scottrade, our clients trade and invest

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welcome back, everyone. we are continuing to follow a story out of birmingham, alabama this morning. a ups cargo plane has crashed. it was an arab bus a-300 plane that was coming from louisville. that is ups' biggest air hub. the birmingham mayor says there were only two people on the plane, and the pilot and co-pilot were both killed. we are looking at video from our local affiliate. phil lebeau joins us on the "squawk" newsline with more on this. >> any time there's an airplane crash, regardless of whether or not it's a commercial passenger flight or a cargo flight, it the gets a lot of attention for obvious reasons. what is of particular concern

when you're talking about a cargo flight is whether or not there was something in the cargo that contributed to this crash. we don't know that at this point. there's an ntsb go team on its way to birmingham. clearly they will immediately start to look at exactly what brought this plane down. it was outside the perimeter of the airport so it was on approach to landing, but this is different than the louisiana flight where it was actually during a landing, so was it a mechanical failure? was there something in the cargo that contributes to this crash. those are the primary questions that investigators will start looking at immediately. >> hey, phil, the a-300 used more these days for cargo or for passenger -- as a passenger jet. >> i think it's transitioned now to becoming a little bit more of a cargo plane. it's still used for passenger flights, but because of its size, relatively limited in text of configuration, it's more --

you see it more for cargo. >> and accidents, incidents in terms of its safety history? >> i don't know the exact numbers, but i do know it's not one of those that immediately jumps out and you say oh, okay, well, we've had problems with this plane and i'm not surprised that they say there was a crash here. you know, that's one of the things that investigators look at. was there a particular problem with this type of aircraft in the past. at first blush it does not jump out at me. >> okay. >> phil, us a pointed out, there are more questions than answered at this point, but, thank you, for the background on this. we'll continue to follow this. again, that is phil lebeau. when we come back breaking economic data. we're just a few minutes away from producer price index numbers for july. as we head to break, take a look at the u.s. equity futures. at this point dow futures down by 39 points. that's weaker than we saw earlier. s&p 5 futures up by 4.5 and nasdaq by 6 points.

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welcome back to "squawk box." we're about 90 seconds away from ppi numbers for july, but, first, we have one story we're continuing to follow today. carl icahn taking that large

position in apple and saying that the stock could be worth as much as $700 a share. i'm always used to saying million if not billion. $700 a share if ceo tim cook pushed for a larger stock buyback. in a tweet yesterday icahn announced he's spoken to the apple boss and described the conversation as nice and said they plan to speak again shortly. in an interview with the "wall street journal," icahn says he wants the buyback to happen right away while the shares are still cheap and i'm still waiting for tim cook's tweet to describe how he thought the conversation went. >> i think he's taken to pinterest. he's going to go on pinterest. >> wouldn't put that on. there's no icloud. what does apple have? >> icloud kind of thing. >> he could imessage everybody. anyway, before we get to the ppi numbers, take a quick check on the futures right now and see how things are setting themselves up. red arrows. dow looks like it will open off about 40 parents, the s&p 500 off half a point and the nasdaq off 6.5 points.

we have rick santelli standing by at the cme in chicago and steve liesman at the table, and we have ubs senior, u.s. economy drew matis all on set, and, rick, you got about five seconds, but we'll give you a chance to tell us the numbers right now. >> all right. survey says that july ppi unchanged, unchanged. >> wow. >> for july. that's much less than expected, and last month's 0.8 is unchallenged. if we take out the all important food and energy it's also ppi light, up 0.1, half of what we were looking for. if we look at year over year i think you'll find that this trend must continue and it does. we're looking for 2.4 to 2.5 year over year headline. it's 2.1. take out food and energy, it's up 1.2. so the latter up 1.2 is close to expectations. it's a half a percent less than

our last look at 1.2, so at least at this point the type of inflation as measured by the government seems to be moderating a bit, and then i would stress that's their measurement. i still think most growsry stores would refute that, but it's good news nonetheless. just like what's going on in europe. on a quarter over quarter basis the aggregate gdp of europe improved 0.3. year over year it did not. remember, our recession ended a long time ago. we're still not throwing ticker tape parade, but it goes a long way to explain some of the movement in yields of late. call it the taper. i don't think europe or carl icahn necessarily the data points or what they do is necessarily driven by that crazy conversation we continue to have. back to you. >> okay. thank you, rick. for more on the data let's get to steve and our ubs senior u.s. economist drew matis. >> what do you think?

>> i think this report will get more than the average look from the federal reserve that had a wholesale price report gets. they are not all that interested in it in the sense that they are more concerned with consumer prices, but there is some concern about disinflation. lowering in the rate of inflation amongst some for the federal reserve, and when we look at the details of this report, and one of the ways we look at it is go up the stage of processing. you look at intermediate goods and you look at crude goods, and what that is thinking about bread, flour and wheat, so that would be up the stage of processing. and you do see some negative numbers in there when you take out food and energy. for example, intermediate goods less food and energy, down 0.3, same thing for crude goods, less food and energy, and, of course, food and feed stuff, down 1.3%. in the finished goods sector, residential, natural gas, down 3.9 but kind of take that out, and when i look at it and when i think about what dennis lockhart said yesterday, what his big concerns are, well, he's not sure that employment is on

steady course. he's not sure we're out of the woods on disinflation or a debt ceiling debate in the fall so let me through that to drew. drew, first of all, i guess there's two questions to you. one is the -- how concerned is the fed on this issue of disinflation right now, and, secondly, what do you get from this report on that story? >> i think they are very concerned about inflation in part because the payroll numbers have actually led them to believe they should taper, right? >> right. >> they had to go to something in order to justify the fact that they are still buying a whole lot of trish ice, i'm not trying to be a conspiracy theorist but if something isn't working in your direction you switch to something else saying this is the new important thing to focus on. i would point out, looking at last month's cpi report that it turned so what we have is producer prices coming down and consumer prices actually beginning to move back up, you know. maybe that says something about margins, i don't know, but what it tells me is the fed should be focused on the primary source of demand and that's the labor market. >> did you read lockhart yesterday? >> i locked over lockhart.

>> lockhart made news a week ago and said that -- what the markets took out of what lockhart said a week ago is we could taper in september, october, november. september, october, november, december, i think he said. yesterday he said he is sure that there is not going to be enough data to taper in september, and -- and the significance of that was -- >> really? >> him also saying that the tapering process is one -- i feel like there should be a sound effect every time we say taper, put a dollar in the hat here, but he said that -- >> he said there's not enough data? >> won't be enough data. he pointed out there will be a gdp revision. >> i think he said earlier it was going to be september. >> he says he's sure there will not be enough. the point he was making is beginning of the process is -- it's a long process. it's not that we're going to do it and stop. we'll begin a process of

reducing fed purchases. >> these guys go on vacation with their kids and promise them ice cream every night down at the beach and never deliver. at some point you just have to taper. at some point -- >> this is the opposite, bad metaphor. >> there was no qe2 taper, or twist taper and why all of a sudden is this such an essential component? >> they have pretty much done that. >> fundamentally different. >> other than twist they have pretty much on qe, on different quantitative easings they have generally eased it down. don't want to create what they call a cliff effect. >> i don't know. three card monty. i agree with our card. if they can't figure out a way to continue the sugar buzz one way, they are going to look at these ppi numbers and the cpi numbers, and they are going to make a case that the old boogie man of disinflation is in the closet. one way or the other they are most likely going to try to cling on as long as they can. >> rick, i'm still waiting for you to send me your numbers. i'm still waiting for your numbers. >> here's the thing. >> because you have better numbers than the government. >> no, no, i don't have better

numbers. >> you talk about them skeptically and say the government's version of inflation but you don't have any other numbers? >> oh, give me a break, steve. >> you give me a break. >> i'll tell you what. i'll tell you what. everybody watching this, all you viewers and listeners out there, i want you to send your e-mails and tweets to "squawk box" to answer the following question. in your lives is inflation as low as the government wants you to believe? that's it. send them in, and i hope it's like mr. smith goes to washington, and you're dumping 50 bags of mail on the "squawk box" desk in the morning. >> rick, the market is so inefficient that if there is -- >> listen, i don't believe the government's calculations, there. >> because you have better numbers? >> and i stayed. >> you have better numbers. >> i don't have better numbers. i have common sense! i don't like substitution. if i liked my big mac, i'm not going to substitute dairy queen for it. if i want to buy a car, i don't want $7,000 worth of air bags. they fudge the numbers.

>> that doesn't make any sense. >> oh, give me a break. that's the difference between real life and the government. six years after the crisis, and you're still making excuses for them to buy government securities. >> yeah, right. >> oh, god, it's disinflation, and when it's not that, it's going to be leap year, maybe leap year means we don't buy it. >> all important food numbers, rick. >> how much are they as a percentage of the total basket of expenses? >> let's see what the e-mails and tweets say. >> that's how you should make policy based on policy. >> oh, wait a minute, when you ask economist, those government surveys, you think are policy. >> what i think is people making decisions based on data, not e-mails. >> first of all, why are a bunch of government professors making any type of inroads into trillions of dollars? >> you can't give it to me. >> give me this populist huey stuff. >> populist huey. >> and you sit there and look at me and try to tell me, oh, my

goodness, let's see, we can't taper, because there's not enough numbers. there's not enough data, it hasn't been ten years yet. >> rook, i will change my mind if you give me the data showing me broad-based inflation in the economy. don't sent me food. don't send me energy. i will factor that in as a percentage -- >> if i don't send you food and energy, that pretty much -- the amount of ruler i have left is about as big as the brains of people making these decisions. >> remember, i was going to bunch you lunch and you were going to have a nice drink together. rick, thank you for this, drew, thank you. >> you're welcome. >> we're going to leave it there. >> i had a question but i guess i'll let that go. >> better that way. >> when we come back, cisco systems reporting quarterly results later today. we'll talk to an analyst next for more on what to expect from the tech giants. "squawk box" will be right back. changing hands online. that's why hp built a new kind of server.

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welcome back to "squawk box," everyone. the futures are a little bit weaker this morning. you'll see right now that the dow futures are down by about 32 point. s&p futures off by just over three points and the nasdaq off close to 5 points below fair value. steve? >> cisco rolling out results after the bell today. joining us now for a preview, mike genovese. on bit of a roll, wall street has high expectations for this company. >> yeah, "a.i." grow. that's the risk going into tonight. expectations high and everybody is positive, but i don't really

see a scenario under which they slip up. i'm expecting them to come up certainly a little bit above revenues and a few cents above eps versus the consensus. the most important number to watch, in my opinion, is the year over year product orders. last quarter those improved from 0% to 4% year over year. it's the direction of that number that matters the most. i'm expecting that to go up to 6% this quarter. driven by continuing strong u.s. enterprise trends, better federal, better europe, and i think the stock is going to continue to roll around -- roll along. i recently raised my price target to 30 and i can easily see the stock going into the low 30s. >> mike, just let me explore that a second. is this an execution story as in doing better with the same revenue, or is this a second company whose revenue is actually growing because there is a something out there in terms of companies buying additional equipment and software? >> well, the revenue growth rate is getting a little bit better. a year ago at this time they put up a 2% year over year order

rate. they guided the next quarter up 2% to 4% year over year. this time we think they are going to put up a 6% order rate, probably guide the quarter somewhere in the 5% to 7% year range,p so it's not a tremendous revenue story, but it's been getting better and continues to get a little bit better. we're probably going up towards 7% or 8% normalized over the next couple of quarters and then the execution is very, very strong on the margin front, also on fending off new technology challenges like software to fine network. company's done a great job with the messaging that. the c.o.o. and cfo have done a great job, the kind of revenues they can beat with no tailwind and when you get the revenue like right i'm expecting them to threet by three to four to five cents a quarter. >> out of the ones you mentioned, which one are you worried about, one keeps you up at night, federal, europe, u.s. companies? one part of that that has you worried? are you worried about the

federal budget situation, worried about the european recovery? >> yeah. i'll tell you the u.s. service provider and the u.s. enterprise business are really doing quite well for both cisco and its peers. and -- and, you know, that's where we have direct reads and direct field checks, and that continues to be strong. i'm really looking at what competitors like juniper have recently reported with federal doing better sequentially in the june quarter, with europe doing better. you know, it's harder to get really direct read on those, but when i look at the competitors doing a little bit better, i think that's going to also show up in cisco's results. >> mike, we've been having a debate here about how much growth is worth versus how much fed stimulus is worth. tell me something. if i could tell you that companies out there were going to spend call it 1% or 2% more on cisco products, talk about operating leverage, in other words, how much a dollar of top line revenue would mean for profits. if i told you 1% more spending, how much would you raise earnings at a company like cisco? >> you know, probably --

probably 3%. >> so 3-1 kind of thing. >> yeah. the guidance for the company here is, you know, long-term guidance is to grow revenues 5 to 7 and to grow earnings 7% to 9%. i think they have a little bit more leverage than what they are saying, particularly on opex and where they have been performing great. you know, we're targeting this thing at 14 times earnings which is kind of at the high end of cisco's historical range. the $30 price target is based on 1 times the next year's estimates. we think that as the earnings growth gets a little bit better, up towards 10% year over year, it will be able to hold that multiple. our earnings numbers will probably go up a little bit and our price target again is 30 but we could easily see the stock at 32, 33 over the next couple of quarters. >> mike? >> mike, thanks for your report this morning. cisco after the bell today. >> that's right. >> and also tomorrow a big deal. >> and tomorrow we'll talk to cisco's ceo, i may be taking

your reader, is that your reader? >> is that mine? >> excellent. >> we'll talk to john chambers first on cnbc at 8:40 a.m. eastern. >> okay. coming up, several stocks to watch before the opening bell. we're going to check in with the man, jim cramer, at the new york stock exchange when we return.

welcome back, everybody. we're continuing to follow a story out of birmingham, alabama this morning. a ups cargo plane has crashed, an arab bus-300 plane coming from louisville, and the birmingham mayor is saying there were only two people on the plane, poilt and cilot and co-p both killed. scott wapner and jim cramer are standing by. watching some of the earnings out. any thoughts on deere or macy's. >> deere it's very difficult because what happens is deere traditionally has a very weak corn fence call. going to say it.

very cautionary so a lot of people went nuts at the beginning, saw an 86 tick and people realize once the conference call starts, i think they will not be as upbeat. too much brazil and not enough america. i like agco over deere. macy's don't write it off. not an important quarter althoughquarter. who am i to tell you that it wasn't disappointing? >> it was interesting. you talked about what happened in the second quarter calling. disappointing. when you started talking about what they're seeing right now in back to school, say the trends have been improving and that ready to wear for women has been improving. that's been a disappointing area for a couple of years for them. >> bloomy's has been a problem. i was on "mad money" recently and we were concerned about what is going to happen with back to school. he said, listen, too early to give a read. i think the journal and the -- a lot of papers have been saying back to school is bad. i don't know. i got some kids going back to school. they're still on vacation. >> retail is very up in the air right now, too. teen retail has been bad. and now macy's. >> apple retail?

>> that's a different category. that's not even -- that has nothing to do with anything else. it has its own category. >> we have the man. >> i know. >> we a v. the man. as far as i'm concerned, this is the big story. >> what should they do, jim? debating this morning. 140 billion? i say give back 70 of it. >> it's not what they should do. it's what icahn says they could do. >> that's the interesting thin. what jim just said, a new sheriff in town. right? i wonder hue the relatiow the r. carl told me he was on the phone with tim cook. >> what does an amiable mean? >> nice, friendly. >> nobody hurt? >> that's now. >> very, very nice. >> that was the first conversation. >> yes, but he said they're talki talking again soon. >> he told me they're going to talk about again. >> i want to know what cramer wants to do. what do you want to do? no no, no. jimmy, give me an answer.

>> after icahn made 250 million, tim cook made him a billion. i think in the end apple wants to do what's right for the customer, which is something that people don't really like so much because they remember what they want to do what apple should do for their shareholder. i think cook is going to defaut to what apple is going to do for the customer. you don't want to spend the money that i want wants to. he's too conservative. everybody has to raise a price target because it's totally overrun. stock is up on icahn talking about it. >> 500 today. >> i think the stock is -- this stock -- >> bad for the company? >> it's not a financial story. they already said that when -- how much does it take to for icahn to be out of tim cook's hair? >> he doesn't like to go away. >> carl think it's going to go to 700 again. >> he's not going away. >> 700, walk away or ask for more?

there will be more money in that pile of cash that am has. >> i don't understand your point of view. what does apple keeping $140 billion of cash on its books have to do with the consumer? >> okay. now, i understand i disagree with cook. i think that icahn is right. i'm saying that cook is so conservative with the money and he did the buyback but he's just so not focused on the capital and icahn is deeply focused on the capital. i think that icahn, as scott said, is not going to go away. he wants what happened with netflix. maybe hec even wants a seat at the table. >> would you give him a seat? >> yeah. >> you would give icahn a seat on the board of apple? >> i think icahn is the single best investor in america today. yes, i would. >> hold on, jim. hold on. how is it possible that we've had conversations for months about how you thought that icahn was crazy to go after dell, right? distraction and mistake.

>> he was trying to make someone pay up for that. >> that's different, though, right? that's a company -- trying to hijack the company again? >> no, i think when he's invited on -- those who have spoken with icahn, when it is to use scott's words, collegial, have gotten a lot out of the man. when you just directly say, listen, here, talk to the hand, then he just turns on the -- h gets that n. that abrasive kind of school yard thing. >> that's why i'm saying i want to see how that relationship between icahn and cook goes from here. the first conversation is great. now let's see what happens when carl doesn't get what he wants. >> judge, can you get icahn and cook on the phone today on "fast money"? can you get them going? >> i'm working on it. >> that's a long shot. >> i'm working on it. no promises. no promises. >> great job. >> no promises. >> all right. >> good conversation. >> don't promo it yet. >> icahn and cook at noon, right? >> sure. >> all right. thanks, guys. >> see you in a few minutes. >> okay.

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dan. you have the last word. i just want to make a point. mr. cramer just called carl icahn -- i think he said he was one of the best investors in the world if not the best investor in the world right now. he may have a hot hand. >> he is hot. >> i think it's a disgrace. >> what? >> it's not a disgrace. >> the idea this is not an investor who knows anything about technology and, by the way, people here prepared to put him on the board all of a sudden. i don't understand this. >> listen to what he's done. >> i'm with you in one sense. this strips away the romance of being an apple shareholder or apple loyalist. this takes apple out of iconic status and make it's just another stock. >> carl icahn, netflix up 186%. federal mobile up 115%. wib webmd up 131%. >> holding companies hostage. is apple the company you want to jump on or let this company find

its greatness again? apple is not broken. apple may be taking a break. >> do you remember block buster? do you remember time warner? >> time warner. >> right now. he said right now though. right now is calls this year. >> same tactics. is it working now simply because he's hitting cash rich companies? >> dan, thank you for joining us. be back here again tomorrow. we'll see you tomorrow. right now it's time for "squawk on the street." good morning and welcome to "squawk on the street." i'm david faber with jim cramer and scott wapner live from the new york stock exchange. carl quintanilla has the day off. futures holing on to their losses after earnings, well, an earnings miss for may macy's and wholesale prices were flat for july. ten-year note yield is worth